Arbor Financial Melbourne – An Overview of Employers’ Sponsored 401(K) Plans for Young People
A 401(K) plan refers to a popular retirement savings account that large companies and small entrepreneurs sponsor for their loyal employees. Under this plan, the employees allow their employers to transfer a percentage of their regular pay check into a lucrative investment scheme. The employers also make a matching contribution from their business funds to the saving account on behalf of their employees.The employees can then choose to deposit the contributions to the retirement savings account in a diverse range of long-term investment schemes such as mutual funds. However, there is a limit to the amount these corporations and entrepreneurs can pay into a savings account.
Arbor Financial Melbourne – How can new employees participate in their employer-sponsored 401 (K) plans?
Arbor Financial Service of Florida, Inc. is a leading investment advisory service company and the franchisee of the Retirement Income Store. This corporate enterprise specializes in helping people throughout America to choose the right investment options for their retirement. The corporation even arranges seminars to spread financial literacy among adults.
According to the Arbor Financial Melbourne team of specialists, many young people might want to participate in their employer-sponsored 401(K) plans. This is because they can avail tax breaks on the monetary contributions which they make under these retirement savings accounts.Moreover,these individuals are only liable to pay taxes on the amount they withdraw under the savings accounts when they retire. However, these employees first need to be aware of the following eligibility requirements to participate in the 401(K) plans:
- They must be 21 years or above,
- They must be in the service of their present employers for at least 12 months,and
- Their employers have the right to terminate the retirement savings account at their own discretion.
Young people who are on the verge of starting their careers choose to participate in their employer-sponsored 401(K) plans for various reasons. First of all, their contributions to retirement savings accounts are exempt from taxes. Secondly, their employers pay a matching contribution under the savings accounts subject to specific restrictions. Finally, the amount of money these individuals withdraw under the 401(K) plans when they retire is chargeable at a lower tax bracket.
Benefits of participating in the 401(K) plans
The benefits of voluntarily participating in an employer-sponsored 401 (K) plan for employees are as follows:
- The contributions to the retirement saving account reduce the tax liability on their paychecks,
- They can decide on what percentage of their paychecks to deposit to the saving account,
- The contributions they make to the saving account earn interest at compounding rates,
- The scheme encourages them to save for their retirement at a young age, and
- They get to retain the outstanding amount to the retirement savings account on changing jobs.
The Arbor Financial Melbourne team of specialists concludes by saying that participating in their employer-sponsored 401(K) plan is an easy way for them to save for their retirement. However, they need to make a constant contribution to the savings account to accumulate a huge amount. Above all, these individuals should not withdraw money from savings accounts before retiring. Taking this step neutralizes the benefits and makes them liable to penalties for premature withdrawal.